Changes aimed to help more homeowners refinance mortgages

The Obama administration late Tuesday released details on how more struggling homeowners can refinance their mortgages, a plan getting mostly favorable reviews in South Florida.

Federal officials say they will revamp the Home Affordable Refinance Program by eliminating some appraisals and loosening underwriting requirements, making it easier for seriously "underwater" homeowners to get out of burdensome mortgages.

To qualify, homeowners must be current on their payments, and the mortgages must be backed by Fannie Mae or Freddie Mac, the government-run companies that guarantee about half of all home loans nationwide.

The revisions are likely to help tens of thousands of South Florida homeowners who so far have been shut out of any government relief, Fort Lauderdale mortgage broker Ryan Paton said.

The government is doing away with a cap that prevented borrowers whose mortgages exceed 125 percent of the value of their homes from being eligible for the program. Other changes include reduced risk for lenders and lower fees for borrowers.

People who otherwise may have been tempted to walk away from their homes will be able to qualify for some of the lowest mortgage rates on record and possibly pay off their homes faster.

"I think this is huge," said Paton, president of Capitol Lending Group.

Nearly half of all single family homes with a mortgage in Palm Beach, Broward and Miami-Dade counties are worth less than what's owed, according to third-quarter data from real estate website Zillow.com.

Underwater borrowers bought or refinanced at or near the peak of the housing boom in 2005 and then watched as prices plummeted. Homeowners who are underwater may not be able to break even in a sale for a decade or more. As a result, many of these homeowners are likely to fall into foreclosure.

The government unveiled the refinance program in 2009, saying it would help 5 million homeowners. So far, fewer than a million homeowners have been able to take advantage, but the government says it hopes the changes will double that number.

Lender participation in the refinance program is voluntary. Reluctance by banks to refinance mortgages is one reason the original program fell short.

David Hoy of Coral Springs stands to benefit from the changes.

The 45-year-old software engineer said he has excellent credit but was too far underwater on the four-bedroom home he bought in 2004 to qualify based the original terms of the program.

Hoy said he's been frustrated that until now federal aid has gone mostly to people in the direst of circumstances and excluded those homeowners "who did everything right."

"Here I was being responsible, but the government was bailing out people who were not responsible," Hoy said. "I wasn't too thrilled about that."

Even with the revisions, many South Florida homeowners may not qualify, said Ken Thomas, a Miami-based banking analyst.

"That's when banks should step in and try to work with people, and I don't see that happening," Thomas said.